Pacific Capital faces shareholder lawsuit

A New York law firm is fishing for clients in a shareholder class-action suit it filed against Pacific Capital Bancorp.

Stull, Stull & Brody filed a complaint in federal court in Los Angeles on Sept. 9 seeking to speak on behalf of Pacific Capital Bancorp’s common stockholders from April 30 to July 30. Pacific Capital Bancorp is the parent of Santa Barbara Bank & Trust and several other banking brands in California.

In the complaint, plaintiff William Jurkowitz alleges he bought Pacific Capital shares in June at “artificially inflated” prices and suffered losses as the stock declined from near $7 at the end of April to a little more than $2 at the end of July. The law firm, which declined to discuss the case, is looking for additional plaintiffs.

Shareholder lawsuits have become common in the wake of big losses. Thousand Oaks-based Amgen, for example, was the target of several such suits when shares tumbled in 2007 after negative news about a study surfaced in a cancer newsletter before the company told shareholders.

Debbie Whiteley, executive vice president of investor relations and corporate communications at Pacific Capital, said the lawsuit is baseless and that the bank will fight it.

“We believe this allegation and lawsuit to be completely without merit, and we intend to vigorously defend against it,” Whiteley told the Business Times.

The complaint against Pacific Capital alleges that the bank’s senior executives misled shareholders about the company’s reserves for loan losses. When the true picture emerged and the bank announced an additional $117 million provision for loan losses, the complaint alleges, shares tumbled and stockholders suffered.

The complaint also alleges that an analyst at investment bank Sandler O’Neill & Partners misled investors by issuing an erroneous “buy” rating on Pacific Capital shares. Pacific Capital has tapped Sandler O’Neill to help it evaluate ways to strengthen its capital base.

The complaint comes as Pacific Capital has proposed a stock split that could be used to raise capital if necessary. Whiteley said litigation often comes with the territory when navigating difficult times.

“In the current environment, and in particular in connection with transactions such as the proposed reverse stock split, it is not uncommon for companies to be subject to this type of allegation,” Whiteley said via e-mail.